We’re missing 225,000 housing units. From the year 2000 to 2015 there were 225,000 housing units that should have been built in Washington state but were not. Various reasons and issues created this gap - the recession, construction costs, a diminished labor force in the building industry, oppressive government and municipal regulations, land use and building code etc… Supply and demand is economics 101, but the local trends have not honored this principle with the job and population growth creating a demand that the supply falls dramatically short of. This missing number of houses includes both owner and rental units, and it impacts everyone in slightly different ways. It impacts the young professionals who would/could be first time buyers but are priced out of the neighborhoods they want to live in. It impacts the families that want to raise their children with enough space in an affordable, but nice neighborhood. It clogs the freeways and traffic as more residents flee the urban core looking for affordable housing and then congest the roads commuting to their jobs. It hits the low income renter who watches rent rates creep up and sees their rent dollars yield a diminished rental property condition and location. As WA residents we all pay for this 225,000 disparity in different ways, and we hope that solutions are enacted soon that effectively close the gap.
At Sound Realty Group we see this issue through the investor/property owner perspective. Here’s what this 225,000 unit shortage means for landlords: There is a desperate need for “affordable.” That doesn’t necessarily mean low income, but it does mean “attainable.” “Since 2000, the state under-produced 181,000 rental units for households earning 80% or less of AMI relative to the increase in the number of households formed in these income levels.” That means that out of that 225,000 number, 181,000 units should have been for average, middle income renters. AMI (Area Median Income) in King County households for 2016 was $84,897. This isn’t just a low income problem, this is a middle class problem. Working with this number and applying the 30% rule (ideally 30% of one’s income covers housing costs) this median King County household would be paying around $2,100/month in rent. The current opportunity for landlords is creating and curating a rental product that appeals to that middle income renter. The majority of the new construction apartment projects being delivered target a higher income renter. These buildings are typically more luxury level, with high end amenities and a high price tag for monthly rent plus extra fees. Some of these high brow amenities could/should be replicated in the middle class and “mom and pop landlord” rental space, like secure package delivery space and pet rent options.
However, most median income renters are just looking for an affordable and clean rental unit in a safe and conveniently located neighborhood. We’re encouraging our clients to invest in this space since the data points to a need for rental space for middle and low income tenants. Hopefully more development and government regulations will contribute to more units (both rental and owner occupied) coming online to serve this gap, but until then we recommend buying/building and holding onto this type of real estate!